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FOREIGN TRADE UNIVERSITY Faculty of Economics and International Business

(2nd semester, 2012-2013)

Lecturer: Nguyen Huyen Minh, PhD huyenminh@yahoo.co.uk | http://twitter.com/huyenminh

1. Marketing Management (Kotler, Keller), Prentice Hall, 14th edition, 2012 (Chapter 13). 2. Principles of Marketing (Kotler, Armstrong), Prentice Hall, 14th edition, 2012 (Chapter 8). 3. International Marketing (Cateora, Gilly, Graham), McGraw-Hill | Irwin, 15th edition, 2011 (Chapter 13, Chapter 14).

4. Services Marketing (Zeithaml, Bitner, Gremler), McGrawHill, 5th edition, 2009.

5. Services Marketing (Lovelock, Wirtz), Prentice Hall, 6th edition, 2007.

What is a service?
A service is any act or performance one party can offer to another that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. Increasingly, manufacturers, distributors, and retailers are providing value-added services, or simply excellent customer service, to differentiate themselves. Many pure service firms are now using the Internet to reach customers; some are purely online.

The GATS Modes of Supply (1/2)

Mode 1: Cross-border
Consumer Service supply
The service crosses the border Service supplier


Mode 2: Consumption abroad

The consumer is abroad Consumer Consumer

Service supply
Service supplier

Mode 3: Commercial presence

Service supply
Establish commercial presence

Commercial presence


Direct investment


Consumer in C


The GATS Modes of Supply (2/2)

Mode 4: Presence of natural persons
Service supply An independent goes to country A Consumer


Natural person
An employee is sent by a company of country B Service supply

Commercial presence

intra-corporate transferee Juridical


Consumer WTO/OMC in C

Service(s), as defined by the American Marketing Association

1. Products, such as a bank loan or home security, that are intangible or at least substantially so. If totally intangible, they are exchanged directly from producer to user, cannot be transported or stored, and are almost intantly perishable. Service products are often difficult to identify, because they come into existence at the same time they are bought and consumed. They comprise intangible elements that are inseparable; they usually involve customer participation in some important way; they cannot be sold in the sense of ownership transfer; and they have no title. Today, however, most products are partly tangible and partly intangible, and the dominant form is used to classify them as either goods or services (all are products). These common, hybrid forms, whatever they are called, may or may not have the attributes just given for totally intangible services. 2. Services, as a term, is also used to describe activities performed by sellers and others that accompany the sale of a product and aid in its exchange or its utilization (e.g., shoe fitting, financing, an 800 number). Such services are either presale or post-sale and supplement the product, not comprise it. If performed during sale, they are considered to be intangible parts of the product.

The following definition was approved by the American

Marketing Association Board of Directors:

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. (Approved October 2007)

Product/Service, by 3|5 level model analysis

Categories of Service Mix

The service component can be a minor or a major part of the total offering. We distinguish five categories of offerings: 1. Pure tangible gooda tangible good such as soap, toothpaste, or salt with no accompanying services. 2. Tangible good with accompanying services a tangible good, like a car, computer, or cell phone, accompanied by one or more services. Typically, the more technologi-cally advanced the product, the greater the need for high-quality supporting services. 3. Hybrid an offering, like a restaurant meal, of equal parts goods and services. People patronize restaurants for both the food and its preparation. 4. Major service with accompanying minor goods and servicesa major service, like air travel, with additional services or supporting goods such as snacks and drinks. This offering requires a capital-intensive goodan airplanefor its realization, but the primary item is a service.

5. Pure service primarily an intangible service, such as babysitting, psychotherapy, or massage.

Basic Focus Strategies for Services


Narrow Many

Unfocused (Everything for everyone)


Fully Focused (Service and market focused)

Market Focused

Reading: Competing Strategically through Service






Resulting Implications (1)

1. 2. 3. 4. Services can not be inventoried nor easily patented Services can not be readily displayed or communicated Pricing is difficult Service delivery and customer satisfaction depend on employee and customer actions 5. Service quality depends on many uncontrollable factors 6. There is no sure knowledge that the service delivered matches what was planned and promoted

Resulting Implications (2)

7. Customer participate in and affect the transaction 8. Customer affect each other 9. Employees affect the service outcome 10. Decentralization may be essential; mass production (servuction) is difficult 11. It is difficult to synchronize supply and demand with services 12. Services cannot be returned or resold.

Reading: The Expanded Marketing-Mix for Services

Services Marketing: Three-In-One Story

Service Quality: The Gaps Model

Reading: How UPS Closes the Gaps with Technology

Customer Perceptions of Service Quality and Customer Satisfaction

Reading: Culture Influences Marketing Research


The Tip of the Iceberg Problem

Customer Complaints Behavior

Why do customers complain?
Restitution and compensation Vent their anger Help to improve the service Altruistic reasons

Why dont unhappy customers complain?

Will not take the time to write, phone etc. Do not believe that the company will be willing to resolve it! Do not know were to go or what to do.

Customer Complaint Actions Following Service Failure

Effective recovery from a failure can restore the standing of an organisation To be effective, recovery should be rapid, appropriate and empathetic Recovery facilitated by empowerment of staff Recovery may be facilitated by blueprints
Reading: Service Recovery across Cultures

Service Recovery Strategies

Service Recovery Strategies

Service Blueprinting
Visual representation of a service process that can show: Principle functions Timing and sequencing Participants involved Line of visibility Tolerance levels Feedback loops

Building a Service Blueprint

Step 1
Identify the process to be blueprinted.

Step 2
Identify the customer or customer segment.

Step 3
Map the process from the customers point of view.

Step 4
Map contact employee actions, onstage and backstage.

Step 5
Link customer and contact person activities to needed support functions.

Step 6
Add evidence of service at each customer action step.

Service Blueprint Components

CUSTOMER ACTIONS line of interaction ONSTAGE CONTACT EMPLOYEE ACTIONS line of visibility

BACKSTAGE CONTACT EMPLOYEE ACTIONS line of internal interaction


Service Blueprint Components

Service Blueprint: an Example for Hotel

Yield Management: Four Demand States

Excess demand - Demand exceeds capacity constraints of the organisation Demand exceeds optimum capacity - A rule of thumb is that quality degrades if more than 75% of capacity is used (Heskett, 1986)

Demand and supply balanced Excess capacity - Productive resources under utilised Capacity Management


Demand and capacity balancing


Excess demand (lost business)

Demand exceeds optimum capacity Service quality declines



0 0 2 4 6 8 10 12 14



Excess Capacity (wasted resources)



Capacity Management